August Construction News

News & Market Activity

Release of Infrastructure Transactions Unit Report – an examination of issues associated with the use of NZS Conditions of Contract

The Infrastructure Transactions Unit (currently within the New Zealand Treasury, but moving into the New Zealand Infrastructure Commission) has released a report (Report) following its commission of an independent review of the use of the NZS Conditions of Contract for Building and Civil Engineering Construction in local and central government initiated infrastructure projects.

The Report summarises the review findings, identifies issues from both a public and private sector perspective, and outlines opportunities for improvement in the construction and infrastructure sectors going forward.

The Report’s overarching finding is that there is a culture of mistrust between the public and private sectors. This influences approaches to procurement, contract drafting and the distribution of risk between principals and contractors. Mistrust has resulted in the extensive use of special conditions in NZS Contracts, leading to inappropriate allocations of risk, misunderstanding and increased delay, cost and administrative burden.

Some of the other key challenges outlined in the report are the:

Lack of knowledge and skills in delivering infrastructure projects in the public sector,

Disproportionate amount of risk transferred to contractors, who are not in a position to manage it,

Use of unreasonable and complicated special contract conditions,

Use of time bars resulting in contractors not being paid for variations,

Absence of caps on contractors’ liability (there is currently no provision for liability caps in NZS Conditions of Contract), and

Failure of Engineers to a contract to achieve independence.

The Report outlines some opportunities for improvement relating to the use of NZS Conditions of Contract by the public sector, including introducing the ability to track changes into the general conditions of contract to allow parties to read contracts as one concise document; investigating how contracts can have more reasonable time bars and wider use of contractor liability caps; and considering establishing a panel of experts who can be procured for the role of the Engineer to the Contract to ensure Engineer impartiality.

The Construction Sector Accord, signed by the Government and industry in April 2019, and the newly established New Zealand Infrastructure Commission, Te Waihanga, aim to address some of these challenges and have committed to transforming the construction and infrastructure sectors.

Auckland Council’s planning committee has approved high level plans that provide for 34,500 new homes and town centres near Drury, and on State Highway 22 near Jesmond Road. Development will occur over the next 30 years. Indicative designs show a mix of low, medium and high density housing, with 245 hectares also allocated to light industrial and business development.

With no specific legislation for tiny houses, some councils treat them as buildings that require full building code compliance, while others consider them vehicles that fall under the Land Transport Act. Alan Dall’s tiny house on wheels in Canterbury falls into the former category – and he’s now seeking court action to keep his house after he was issued a Notice to Fix by the Hurunui District Council. The case is likely to be a landmark decision for the future of tiny houses in New Zealand.

Building on the long-awaited central hub at Queenstown’s Jack’s Point is about to start – comprising 110 homes, 600 visitor accommodation rooms and commercial spaces. The $500m development is intended to service the resident population that will eventually reach about 8000. The design for the 15 hectare site will promote the use of sustainable materials and green engineering systems.

The majority of 470 submissions to the Government regarding the upcoming Building Act overhaul have advocated for compulsory insurance for those building a new home or undertaking a renovation. Head of Research for Consumer NZ, Jessica Wilson, says that there is a big gap in consumer protection in this area, and compulsory insurance for works over $30,000 will ensure that most bathroom/kitchen refits are also covered.

An $80 million development bringing together dozens of businesses in Christchurch's central city will open next month. Riverside Market will be packed with over 70 different businesses, with 18 months of work nearing completion as tenants begin their fit outs. The project has involved a large degree of recycled materials – ironbark timber from Lyttleton wharf, bricks from the Duncan Buildings on High Street, and café windows from Lyttleton have all been recovered, along with two clocks from the Moorhouse Ave railway station.

Urban Development Minister Phil Twyford and Environment Minister David Parker, have released the proposed National Policy Statement on Urban Development. The Government is proposing scrapping many unnecessary restrictions on the development of higher-density housing, such as apartment blocks, to allow cities to grow up. Local councils would be directed to allow higher-density developments to be built in areas close to town centres and public transport. The proposed National Policy Statement has now gone out for consultation.

Regional economic development Minister Shane Jones, has announced the multi-million-dollar Invercargill CBD redevelopment will receive $19.5 million from the Government's provincial growth fund. The investment, in the form of a loan, would go towards the $160 million project where a city block will be demolished and rebuilt to include retail, hospitality, office space, entertainment and carpark. It is hoped that the project will increase Southland's real GDP by around $48 million a year, create more than 500 jobs during the construction phase and a further 300 retail and hospitality jobs once complete.

In two new reports, released by Niwa and the Deep South National Science Challenge, researchers Ryan Paulik and Dr Rob Bell investigate how buildings and infrastructure would be hit by river and coastal flooding from storms and sea level rise. Bell warns that we need to put the brakes on development in coastal areas even if areas may not be impacted for a few decades – given sea levels will continue rising. Around 72,000 Kiwis were currently exposed to present-day extreme coastal flooding, along with about 50,000 buildings worth $12.5 billion.

MinterEllisonRuddWatts’ Chair and Partner, Sarah Sinclair has been appointed to the inaugural board for the New Zealand Infrastructure Commission, Te Waihanga. The Commission is tasked with developing a long-term infrastructure plan and pipeline and helping New Zealand Government make decisions to improve the wellbeing of all New Zealanders. Infrastructure Minister Shane Jones announced the board of the new independent Infrastructure Commission at the Building Nations symposium in Rotorua.